Foreign Direct Investment and Stock Market Development in Nigeria

International Journal of Research and Scientific Innovation (IJRSI) | Volume VII, Issue II, February 2020 | ISSN 2321–2705

Foreign Direct Investment and Stock Market Development in Nigeria

Gbalam Peter Eze¹, Ekokeme, Tamaroukro Timipere^2*
1Department of Banking and Finance, Niger Delta University, Wilberforce Island, Bayelsa State, Nigeria
²University of Africa, Toru-Orua, Sagbama, Bayelsa State, Nigeria
*Corresponding Author

Abstract: – This study examines the impact of stock market development on foreign direct investment inflows in the Nigerian economy. This was aimed at ascertaining how the development of the Nigerian Stock Exchange has stimulate the inflow of foreign direct investment to Nigerian businesses. The after effect research design was adopted to examine the dependent and independent variables in retrospect. Historical data spanning 1985 to 2018 was collated and estimated employing the Engle Granger error correction technique. The empirical results indicate that market capitalization and value of deals in the exchange exert a positive impact on foreign direct investment inflows to Nigeria. Although, further observations indicate that only market capitalization exert a statistically significant impact on foreign direct investment inflows to Nigeria. Furthermore, it emerged that all share index is nagative and has a statistically invalid impact on foreign direct investment inflows in Nigeria. The study concludes that market capitalization and value of deals which are a measures of stock market development stimulates foreign direct investment inflows to Nigeria. The study recommends the pursuit of policies of stability to ensure the attraction and retention of capital from overseas.

I. INTRODUCTION

Foreign direct investment is a major source of external finance for developing countries like Nigeria. Existing literature posit that there is a positive relationship between stock market development and economic growth. Additionally, it is clear from previous studies that financial markets tend to develop as the economy grows and financial reform progresses. Stock market development is embodied in the general financial sector development. In other words, stock market complements the development of other parts of the financial system (Adam & Tweneboah, 2008).

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